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Does Being an Authorized User Help You Build Credit?

When you’re just starting to build your credit, every little bit helps. Getting added to someone’s credit card account can give you a boost that could, in a short period of time, make the difference between having to apply for a secured or unsecured credit card. The catch: This easy technique doesn’t always work for everybody.

While asking someone to add you as an authorized user to his or her credit card account might sound like a no-brainer, that’s often not the case. You might think there is no risk in it for you and that in the end, it’s the other party that’s left holding the bag because they are liable for paying the credit card account. This is not a correct assumption. There are risks involved for both parties. So, think carefully before adding yourself to a credit card account by being an authorized user.

By being added as an authorized user, you’re inheriting the primary account holder’s credit habits.

The first, and most important, thing to look for: whether the account holder pays their bills on time. If the primary account holder does not make timely payments, it gets reported on the credit reports of authorized users. It doesn’t take much, or long, to begin to negatively impact your credit score. Credit card issuers report late payments to credit bureaus.

And late payments, as bad as they are, are not the only thing that can hurt you. If the account in question has a high utilization rate, that also weighs heavily on your credit score.1

So it’s best to do your own due diligence. Otherwise, instead of working to build a positive credit history, you may find yourself achieving exactly the opposite.

And then, there is even more to consider.

Not all credit card issuers report authorized users’ activity to credit bureaus, and those that do might not report it in the same way.

Becoming an authorized user can be a way to build a credit history, but there are risks that the strategy does not go according to plan especially if the primary account holder does not make timely payments each month or if the creditor does not report the account to the credit bureaus as you expected.

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